Arlington Company Has Prepared the Following Common-Size Income Statement to Compare

question 3

True/False

Arlington Company has prepared the following common-size income statement to compare its performance with industry averages:
$$\begin{array} { | l | r | r | } \hline & \text { Arlington Co. } & \text { Industry } \\\hline \text { Revenues } & 100.0 \% & 100.0 \% \\\hline \text { Cost of sales } & 43.8 \% & 39.7 \% \\\hline \text { Gross profit } & 56.2 \% & 60.3 \% \\\hline \text { Selling and general expenses: } & & \\\hline \text { Sales and marketing expense } & 18.1 \% & 21.4 \% \\\hline \text { General and administrative expense } & 12.0 \% & 14.2 \% \\\hline \text { Research and development expense } & 4.1 \% & 4.0 \% \\\hline \text { Total selling and general expenses } & 34.2 \% & 39.6 \% \\\hline & & \\\hline \text { Profit before tax } & 22.0 \% & 20.7 \% \\\hline \text { Income taxexpense } & 4.4 \% & 4.2 \% \\\hline \text { Profit (loss) } & 17.6 \% & 16.5 \% \\\hline\end{array}$$ This is an example of benchmarking.

Differentiate between the financial risks borne by bondholders versus shareholders.

Understand the provisions related to stock issuance, treasury stock, and stockholder rights.

Appreciate the nuances of corporate dividends, including their payment, legality, and director liability.

Grasp the legal framework around stock options, stock splits, dividends, and capital management.

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Definitions:

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a particular price over a specified period.

Quantity Demanded

The overall volume of a good or service that buyers are eager and capable of acquiring at a certain price within a specific period.

Pie Chart

A circular graph that shows how some total is divided among its components, usually expressed in percentages.

Relative Shares

The proportion of total income or wealth held by different groups within a society, often used to analyze income or wealth distribution.